PRECIOUS-Gold gains ground as subdued dollar lends support

(Adds comments, updates prices)

* Gold’s overall bias points lower - analyst

* 10-year Treasury yields hit five-month high

Oct 21 (Reuters) - Gold prices rose for a third straight session on Thursday as a softer dollar lifted bullion’s appeal, while investors assessed whether higher inflation would prompt central banks to raise interest rates sooner than expected.

Spot gold rose 0.1% to $1,782.70 per ounce by 0658 GMT. U.S. gold futures were up 0.1% at $1,786.40.

Bullion prices have traded between $1,748 per ounce and $1,800 per ounce so far this month. On Thursday, the dollar hovered close to a three-week trough, driving the metal closer to the higher end of this broad range.

“Gold’s overall direction really hasn’t built momentum as it is unclear where real yields will land given uncertainty whether the Fed will act fast enough to contain inflation or if inflation will outpace the Fed’s tightening,” DailyFX currency strategist Ilya Spivak said.

“While the overall bias for gold points lower due to a rising yield environment, we’re unlikely to get a strong directional push until it becomes clear how vigorously the Fed is going to act.”

U.S. benchmark 10-year yields hit their highest in five months, pressuring bullion as higher yields translate into a higher opportunity cost for holding the metal which pays no interest.

Two U.S. Federal Reserve officials said on Wednesday while the central bank should begin winding down its stimulus measures, it was too soon for interest rate hikes.

UBS analysts said in a note that rising inflation expectations and softening growth expectations, especially amid surging energy prices and slowing industrial activity, could support gold prices in the next month or two.

The bank forecasts gold prices at $1,700/oz at end-March 2022 and $1,600/z by end-December 2022.

Gold is often considered an inflation hedge, though reduced stimulus and interest rate hikes push government bond yields up, reducing bullion’s appeal.

Spot silver fell 0.3% to $24.20 an ounce. Platinum eased 0.4% to $1,046.25 and palladium gained 0.5% to $2,082.08.

Reporting by Nakul Iyer in Bengaluru; Editing by Subhranshu Sahu and Vinay Dwivedi